100 days after the government scrapped 86% of the currency in circulation, where do digital transactions stand? Has the disruptive policy shock been able to change in people’s transaction habits?

Data from the Reserve Bank of India’s electronic payment system indicators can help answer this question. RBI’s monthly database has information on volume and value of transactions through all sorts of payment systems. The digital payment systems commonly used in day to day transactions are: credit and debit cards, mobile wallets, mobile banking and unified payments interface (UPI).

Except for UPI, for which there is data only from November 2016, it is possible to calculate year on year increase in total and average value of transactions for each of these methods. Year on year growth in total value of transactions has displayed a positive trend for all methods except debit cards. The negative growth in value of transactions through debit cards is probably a reflection of ATMs still running dry, as ATM withdrawals accounted for more than 90% of total value of Debit Card transactions before demonetisation. Mobile wallets saw the highest percentage increase in the value of transactions among these methods. Transactions using the newly introduced UPI have increased from Rs90 crore in November 2016 to Rs1,659 crore in January 2017.

This happy picture of increase in value of digital transactions is moderated by the trend in average values of transactions through these methods. Except mobile banking, there has been no year on year growth for most transaction methods in terms of average value of transactions. This is understandable as the cash crunch forced people to go digital for carrying out even small-value transactions.

What is to be made out of these trends? As pointed out previously in a Plainfacts column, most electronic payment methods saw a decline between December 2016 and January 2017, implying that the high growth in digital transactions in the immediate aftermath of demonetisation might not be sustainable. Still, any final verdict on demonetisation’s effect on popularity of digital payment methods should be withheld till the re-monetisation process is complete, .

There can be a useful benchmark to revisit this question at a later stage though. Cash withdrawals through debit cards at ATMs were way ahead of other digital transaction methods such as use of debit/credit cards, mobile wallets or UPI in October 2016, the last month before demonetisation. Using ATMs to withdraw cash had been the default option for people to take care of their transaction demand for money in the pre-demonetisation period. It will be interesting to see if these numbers change significantly once liquidity supply is back to normal.